This is important, because it shows how there is the potential for both harmonization and division. Yet, once you look at what is taking place around the world, it is obvious that a common set of ideas are being readily accepted in different countries around the world.

A good example of this can be seen by looking no further than China, where they announced that the country would follow IFRS standards. As they are going to be phasing in the different provisions one step at a time. This is significant, because it shows how globalization is causing a single form of accounting standards to be embraced. At the same time, the U.S. And EU have begun working together to integrate the different accounting standards in line with IFRS principals. This is important, because it shows how there is an emphasis to slowly integrate these ideas into one basic standard that can be used around the world.(Fritz 2006) Therefore, even with the various cultural differences, the acceptance of accounting-based principals has become an integral part of business. As a result, harmonization is possible, because these basic ideas are being accepted in a number of countries around the world. (China's Move on IFRS 2007)

If the efficient markets hypothesis holds, then could it be interpreted as meaning that harmonization of international accounting standards is unnecessary?

The efficient market hypothesis states that it is impossible to beat the equity markets. The reason why is because they are reflecting the current and future expectations about the business itself. As stock prices in relation to the major market average will reflect these expectations at all times. This is important, because this theory is basically saying that anyone who is involved in the equity markets will have no way of outperforming the averages. Therefore, many individuals have concluded, that it is impossible to beat the markets, which makes creating various accounting standards an exercise in futility. The reason why, is because if you cannot have a better understanding of the situation (through accounting principles), then there is the possibility that this will not provide any kind advantage. Where, the markets and investors are reflecting their expectations about profits in the price of the underlying stock. (Efficient Market Hypothesis 2011)

When you step back and analyze what is taking place, it is clear that even if the efficient market theory is correct there is still the need for universally accepted accounting standards. This is because accounting is necessary in providing clarity to the organization. As it is indentifying, where to most effectively place the different resources; so that you can to the greatest impact upon the organization's overall bottom line.

As a result, the implementation of these different standards can have an effect upon: the all entities and the activities that they are involved in. Where, they will provide the public with additional information including: presenting reliable information and making additional disclosures. Presenting of reliable information is when the different procedures will evaluate the overall strengths as well as weaknesses of an organization, based upon the allocation and use of various resources. This is important, because all entities are given a limited amount of resources that they can use, to achieve their different financial objectives. In some cases, this could be in the form of various financial based instruments such as: cash, stocks, bonds and insurance policies. While at other times, this could be utilizing various natural resources in the production of: different goods / services and the total amount of labor available to address the situation. These different elements will help managers to determine how they can be able to increase their overall profits, by allocating resources where they are most effectively needed. (Efficient Market Hypothesis 2011)

At the same time, it will allow investors and regulators to monitor the activities of the business. Where, investors could use the information from the different reports, to decide if the company has the ability to remain financially solvent (based upon the allocation of the resources). This is because the basic function of all businesses is to make a profit. When an investor can be able to determine, if the actions taken by managers will affect the bottom line, is the point that the information being disclosed is useful. For example, the efficient market theory states that it is impossible to time the market, due to the fact that all current and future assumptions are being reflected in the price of the stock. However, investors such as Warren Buffet will use the different pieces of financial data, to determine if the company is a good long-term investment (in relation to the price of the stock). This is important, because utilizing the data that was provide, has help Buffet be able to experience a larger return, in comparison with other investors (who subscribe to the efficient market theory). In this case, the use of common accounting standards would help Warren Buffet, to determine if particular company could provide him with superior returns. As a result, the harmonization of international accounting standards would be useful for investors, in determining if purchasing a particular company is advantageous. (Efficient Market Hypothesis 2011)

In the case of regulators, the use of financially accepted accounting principles helps to improve their enforcement of different regulations. This is because, the information that is being provided, can gives bureaucrats more clarity about the nature of an organizations activities. At which point, they compare these numbers with public statements that were made by executives, to determine if they are trying to mislead investors. A good example of this can be seen with the Enron investigation. What happened was, no one understood the overall scope of the fraud, much less how it would affect investors (until it was too late). At which point, various executives began to play a game of finger pointing and denial of their involvement. To determine who was responsible for what took place and their roles, investigators would look at the statements that were made by executives (to the public), their personal sales of company stock at the time and the reported financial information in comparison with the off the book special purpose entities. As a result, the former CEOs Ken Lay and Jeffrey Skilling were charged with being the ring leaders of the fraud. This is because both men would make public statements about the financial strength of their company. While at the same time, they were privately selling their shares in the company and continuing to hide the overall extent of the losses. Once regulators were able to unravel the fraud, they would charge these two as the main culprits for what took place. This is important, because it showing how regulators would utilize financial information, to take down the veil of secrecy surrounding what took place. At which point, they would charge the two with securities fraud and making misleading statements to the general public. In this aspect, the use of accounting-based standards was important, in creating a basic foundation for the investigation that took place. Therefore, the harmonization of different international accounting standards is necessary, as the efficient market theory will overlook key aspects of elements that may not be known to the general public (such as fraud). As a result, the various standards help to prevent this from occurring, by leaving a paper trail of what activities took place and when. (Thomas 2002)

Making additional disclosures is when the company is providing added information that can be used, to determine if there is any kind of changes, in the underlying financial condition of an organization. This is important, because this basic standard has been utilized to: keep the public and investors informed about the changing market conditions. Where, it will tell them if there have been changes to the balance sheet of company, based upon particular events. As a result, this is providing information that has been used as part of understanding the financial condition of an organization. When you compare this with the efficient market theory, it is obvious that the improved accounting standards will help to inform the public about what is taking place. Where, this is providing additional information that may not have been known about something that could be occurring internally.

For example, in 2008 UPS was being affected by a sharp increase in energy prices to their business model. Under the traditional market theory, the increase in oil prices would be reflected in the price of the stock. As it was a total evaluation of the current run up to: record highs and the impact that they would have upon the overall bottom line of the company. Yet, in July 2008, the company would report a sharp reduction in quarterly earnings. As they were being hit by record high energy prices and declining demand from customers. (UPS Lowers 2 Q. Earnings 2008) This would have an impact upon the price of stock, as shares would fall from $55.00 to below…[continue]

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